Warren Buffett could teach traders in dogecoin, GameStop and other hot trends a few things about ‘Mr. Market’
As the old joke goes, St. Peter had some bad news for an oil prospector who appeared at the pearly gates of heaven: “You’re qualified for admission,” said St. Peter, “but, as you can see, the section for oil prospectors is packed. There’s no way to fit you in.”
After a moment, the prospector asked to say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector yelled, “Oil discovered in hell!” Immediately, most of the oil prospectors stampeded out for the nether regions. Impressed, St. Peter invited the prospector to move in and get comfortable. The prospector paused, saying “No, I think I’ll go along with the rest of them. There might be some truth to that rumor after all.”
Let that be a warning to CEOs and shareholders. Steering clear of rumors and self-delusion has been one of Warren Buffett’s key rules, ingrained into Berkshire Hathaway BRK.A, -0.43% BRK.B, -0.41% shareholders for years. We all need to hear such lessons repeatedly because reality’s temptations are always at war with our ideals.
The serial frenzies in meme stocks like GameStop GME, -2.19% and cryptocurrencies like dogecoin DOGEUSD, -8.17% make this a good time to contrast what investors should do from what many seem to do. Comparing Berkshire’s and crypto’s faithful is apt given their outsized followings: an estimated 30 million Americans have traded cryptocurrencies and 30 million are expected to stream this year’s Berkshire virtual annual meeting on May 1.
Buffett defines Berkshire as a corporation with a partnership attitude. The value of each investor’s stake will rise (or fall) in lock step. This contrasts with how many seem to view companies with meme stocks or most of the crypto space. There, the culture is casino-like, where a small few stand to reap unimaginable riches while the overwhelming majority lose their shirts.
Moreover, Berkshire’s culture emphasizes patience and permanence. The company ideally holds investments and businesses forever and encourages its shareholders to hold indefinitely, through thick and thin. In the world of meme stocks and cryptocurrency trading, a strong norm favors immediate payday profits to be taken off the board.
